PROPERTY

Title GR No. 120303

GEMINIANO Date: July 24, 1996
Vs.
COURT OF APPEALS Ponente: Davide, Jr. J.
Frederico Geminiano, Maria Geminiano, Ernesto Court of Appeals, Dominador Nicolas, and Mary A.
Geminiano, Asuncsion Geminiano, Larry Geminiano Nicolas– Respondent
and Marlyn Gemiano -Petitioners
Doctrine related to property/Topic:
Builders in good faith, Art. 488, NCC

While the right to let property is an incident of title and possession, a person may be lessor and occupy
the position of a landlord to the tenant although he is not the owner of the premises let.After all,
ownership of the property is not being transferred, only the temporary use and enjoyment thereof.
FACTS:

Lot No. 3765-B-1 containing an area of 314 square meters was originally owned by the petitioners' mother,
Paulina Amado vda. de Geminiano. On a 12-square-meter portion of that lot stood the petitioners' unfinished
bungalow, which the petitioners sold in November 1978 to the private respondents for the sum of P6,000.00,
with an alleged promise to sell to the latter that portion of the lot occupied by the house. Subsequently, the
petitioners' mother executed a contract of lease over a 126 square-meter portion of the lot, including that
portion on which the house stood, in favor of the private respondents for P40.00 per month for a period of
seven years commencing on 15 November 1978.1 The private respondents then introduced additional
improvements and registered the house in their names. After the expiration of the lease contract in November
1985, however, the petitioners' mother refused to accept the monthly rentals.

It turned out that the lot in question was the subject of a suit, which resulted in its acquisition by one Maria
Lee in 1972. In 1982, Lee sold the lot to Lily Salcedo, who in turn sold it in 1984 to the spouses Agustin and
Ester Dionisio.

On 14 February 1992, the Dionisio spouses executed a Deed of Quitclaim over the said property in favor of the
petitioners.2 As such, the lot was registered in the latter's name.3

On 9 February 1993, the petitioners sent, via registered mail, a letters addressed to private respondent Mary
Nicolas demanding that she vacate the premises and pay the rentals in arrears within twenty days from
notice.4

Upon failure of the private respondents to heed the demand, the petitioners filed with the MTCC of Dagupan
City a complaint for unlawful detainer and damages.

The MTCC held that since the petitioners' mother was no longer the owner of the lot in question at the time
the lease contract was executed in 1978, in view of its acquisition by Maria Lee as early as 1972, there was no
lease to speak of, much less, a renewal thereof. And even if the lease legally existed, its implied renewal was
not for the period stipulated in the original contract, but only on a month-to-month basis pursuant to Article
1687 of the Civil Code. The refusal of the petitioners' mother to accept the rentals starting January 1986 was
then a clear indication of her desire to terminate the monthly lease. As regard the petitioners' alleged failed
promise to sell to the private respondents the lot occupied by the house, the court held that such should be
litigated in a proper case before the proper forum, not an ejectment case where the only issue was physical
possession of the property.

The court also held that Articles 448 and 546 of the Civil Code, which allow possessors in good faith to recover
the value of improvements and retain the premises until reimbursed, did not apply to lessees like the private
respondents, because the latter knew that their occupation of the premises would continue only during the
life of the lease. Besides, the rights of the private respondents were specifically governed by Article 1678,
which allow reimbursement of up to one-half of the value of the useful improvements, or removal of the
improvements should the lessor refuse to reimburse.

The RTC of Dagupan City reversed the trial court's decision and rendered a new judgment: (1) ordering the
petitioners to reimburse the private respondents for the value of the house and improvements in the amount
of P180,000.00 and to pay the latter P10,000.00 as attorney's fees and P2,000.00 as litigation expenses; and
(2) allowing the private respondents to remain in possession of the premises until they were fully reimbursed
for the value of the house.6 It ruled that since the private respondents were assured by the petitioners that
the lot they leased would eventually be sold to them, they could be considered builders in good faith, and as
such, were entitled to reimbursed of the value of the house and improvements with the right of retention until
reimbursement and had been made.

On appeal, this time by the petitioners, the Court of Appeals affirmed the decision of the RTC7 and denied8
the petitioners' motion for reconsideration.

ISSUE/S:
Which provision of the law governs: Article 448 or Article 1678 of the Civil Code?

RULING:

Art 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have
the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided
for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one
who sowed, the proper rent. However, the builder or plantercannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner
of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall
agree upon the terms of the lease and in case if disagreement, the court shall fix the terms thereof.
xxx xxx xxx
Art 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which the
lease is intended, without altering the form or substance of the property leased, the lessor upon the
termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should
the lessor refuse to reimburse said amount, the lessee may remover the improvements, even though the
principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the
property leased than is necessary.

Being mere lessees, the private respondents knew that their occupation of the premises would continue only
for the life of the lease. Plainly, they cannot be considered as possessors nor builders in good faith.

Anent the alleged promise of the petitioners to sell the lot occupied by the private respondents' house, the
same was not substantiated by convincing evidence. Neither the deed of sale over the house nor the
contract of lease contained an option in favor of the respondent spouses to purchase the said lot. And even
if the petitioners indeed promised to sell, it would not make the private respondents possessors or builders
in good faith so as to covered by the provision of Article 448 of the Civil Code. The latter cannot raise the
mere expectancy or ownership of the aforementioned lot because the alleged promise to sell was not
fulfilled nor its existence even proven. The first thing that the private respondents should have done was to
reduce the alleged promise into writing, because under Article 1403 of the Civil Code, an agreement for the
sale of real property or an interest therein is unenforceable, unless some note or memorandum thereof be
produced. Not having taken any steps in order that the alleged promise to sell may be enforced, the private
respondents cannot bank on the promise and profess any claim nor color of title over the lot in question.

The right to indemnity under Article 1678 of the Civil Code arises only if the lessor opts to appropriate the
improvements. Since the petitioners refused to exercise that option,20 the private respondents cannot
compel them to reimburse the one-half value of the house and improvements. Neither can they retain the
premises until reimbursement is made. The private respondents' sole right then is to remove the
improvements without causing any more impairment upon the property leased than is necessary.21

WHEREFORE, judgment is hereby rendered GRANTING the instant petition, REVERSING and SETTING ASIDE
the decision of the Court of Appeals of 27 January 1995 in CA-G.R. SP No. 34337; and REINSTATING the
decision of Branch 3 of the Municipal Trial Court in Cities of Dagupan City in Civil Case No. 9214 entitled
"Federico Geminiano, et al. vs. Dominador Nicolas, et al."

Cost against the private respondents.

ESCOBAR